Import vulnerability in the Middle East: effects of the Arab spring on Egyptian wheat trade

The 'Arab Spring' spilled over to Egypt from neighbouring Arab countries in the first half of 2011. General chaos during the political instabilities suddenly caused high uncertainty for consumers and traders, and temporarily rendered institutions dysfunctional. This eventually might have led to a negative market shock, impeding economic activity in general and, in particular, trade. Wheat is the main ingredient in the Egyptian diet and is heavily subsidised in the country. The general availability of cheap wheat flour creates a very high domestic demand for wheat. Therefore, Egypt is highly dependent on wheat imports from other countries for ensuring food security. This dependency makes the country vulnerable to increasing food prices and other shocks to the world market which might challenge flows of imports. This paper investigates the effects of domestic political instability on the wheat trade in Egypt. We analysed monthly trade data for wheat from the Comtrade Database of the United Nations, particularly imports and exports of wheat and wheat flour in Egypt from 2010 to 2014. The analysis showed pronounced and stable seasonal patterns whereby the pattern of 2011, the year of most intensive political turmoil in Egypt, was found to differ significantly from other years. We found robust evidence for a strong, negative demand shock in the second half of 2011 caused by the substantial and enduring political instabilities in the country which resulted from the Arab Spring.